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Gap Inc. said sales fell during the second quarter as the retailer continued to struggle with its turnaround efforts.

The sales decline wasn't as sharp as expected, but the company also signaled weakness would extend this year and pulled down its earnings view.

Shares slipped 0.8% in after-hours trading. Through Thursday's close, the stock has tumbled 25% over the past 12 months.

The San Francisco retailer is in the midst of a prolonged sales slump and has been trying to turn itself around by shutting some stores, shaking up its management ranks and revamping its merchandise to compete better with fast-fashion chains like Hennes & Mauritz AB. Adding to its woes, credit-rating firms have in recent months downgraded Gap's credit rating to junk.

Retailers throughout the country, from department stores and specialty shops to Target Corp., have been reporting sliding sales that are largely the result of falling foot traffic as shippers increasingly turn to Amazon.com Inc. and fast-fashion options. Macy's Inc. last week said it would shrink its physical footprint by 15%, Target on Wednesday reported the first drop in same-store sales in about two years and Perry Ellis International Inc. earlier Thursday said another drop in traffic is prompting it to close a fifth of its stores. Gap, for its part, said Thursday that it still expects to close a net 50 stores this year.

During the quarter, Gap sales at stores open at least a year fell 2%, matching the prior year's decline. Though comparable-store sales have fallen since the first quarter of last year, the rate improved from a 5% drop in the first quarter. Banana Republic remained the biggest drag, with the decline in sales there accelerating to a 9% clip from 4% in the year-ago quarter. Sales stabilized at Old Navy after falling 3% last year, and Gap global sales on a comparable-store basis fell 3%, half of the year-ago pace.

"While I remain unsatisfied with the pace of improvement across the business," said Chief Executive Art Peck, there are "signs of progress," nodding to healthier merchandise margins. "Our management teams share my urgency to create fundamental change," he said.

While Mr. Peck assured investors there were signs of improvement during the second quarter, the company still cut its view for the year. Gap said it now expects to post $1.87 to $1.92 in adjusted earnings per share, excluding restructuring costs. In May, the company had hinted it might not meet its earlier guidance of $1.92 a share. Analysts have expected $1.96.

In all for the period, Gap reported a profit of $125 million, or 31 cents a share, down from $219 million, or 52 cents a share, a year earlier. Excluding restructuring costs, among other items, per-share profit fell to 60 cents from 64 cents.

Total revenue declined 1.2% to $3.85 billion. Analysts projected 59 cents in adjusted earnings per share on $3.78 billion in revenue, according to Thomson Reuters.

Write to Lisa Beilfuss at lisa.beilfuss@wsj.com

(END) Dow Jones Newswires

August 18, 2016 17:35 ET (21:35 GMT)

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